The Kansas City Board of Trade (KCBT) March wheat contract price has support at $5.70/bu. The March contract closed Friday at $5.74. The KCBT July wheat contract has support at $5.90 and closed at $5.92. Another negative sign is that that the week's lower prices were set with increasing volume.

USDA released the February supply and demand estimates. Except for raising the low end of the price range, there were no changes in either wheat or corn. The problem was that the average of the trade pre-release estimate implied that USDA would lower ending stocks. There are some analysts who believe that USDA has underestimated both wheat and corn stocks. Regardless of the beliefs, there are excess wheat stocks (U.S. 655 million bushels and world 5.5 billion bushels). One analyst believes corn ending stocks are closer to 2 billion bu. than the estimated 1.8 billion.

Rain recently helped the Oklahoma (and part of Texas’) hard red winter wheat crop. One problem is that the drought-stricken areas of western Oklahoma only received 0.1-0.2 in., while central Oklahoma received 1.5-2 in. Since central and north central Oklahoma is the major wheat-producing region, the rain increased the odds of average or better yields. Producers were applying nitrogen fertilizer as fast as possible before the rain and will continue to apply fertilizer after the rain.

If the 2009 U.S. winter wheat crop conditions continue to improve, KCBT March wheat contract prices could test the contract low or $5.01. The July wheat contract price could test $5.20. With the new crop basis at about -85¢, the new-crop (June delivery) cash bid could decline to $4.35. The bid is currently $5.07. Nearby cash wheat prices could fall 73¢. [LARRY, these figures need an attribution.]

Elevators are offering between 75¢ and $1.10 less than the KCBT July 2009 wheat contract price for June delivered wheat. With a KCBT July wheat contract price of $5.92, the market is offering about $5.07 ($5.92 less the -85¢ basis) for harvest-delivered wheat. There is about $1.25 upside June price potential and about 75¢ downside risk.